Despite low rice output forecast, basmati MEP cut to $800/tonne.

The move, apparently cleared by the Empowered Group of Ministers headed by the Finance Minister, Mr Pranab Mukherjee, at its meeting on Monday, has been justified on the grounds that basmati is a premium variety, not commonly consumed, and its exports will not impact domestic food security.

Industry observers, nevertheless, question the rationale for reducing the MEP at this point, when there is little evidence of any export slowdown. In 2008, basmati shipments totalled 17.79 lakh tonnes (lt), including 2.53 lt of the new Pusa-1121 variety.

In the current calendar year till June, exports have crossed 12.17 lt, of which Pusa-1121’s share is 4.75 lt. “Even at unchanged MEP of $1,100, we would easily ship out 25 lt this time, with Pusa-1121 alone crossing 10 lt,” the observers noted.

Moreover, Indian exporters are currently selling Pusa-1121 basmati at over $1,400 a tonne free-on-board, with traditional basmati shipments similarly fetching between $1,300 (brown rice) and $1,600-plus (white rice). The existing MEP, thus, is no impediment to basmati shipments.

The new MEP of $800 is lower than even the $963-a-tonne rate now being quoted by the Thai Rice Exporters Association on ‘Hom Mali Grade A’ (Jasmine). “Ideally, basmati should fetch a $200-250 premium over Jasmine, whereas now you are implicitly downgrading it vis-À-vis ordinary aromatic Thai rice,” the observers pointed out.

The MEP reduction opens up the possibility for unscrupulous exporters to adulterate their basmati shipments with non-basmati varieties such as ‘Sharbati’, which is wholesaling at around Rs 36,000 or $730 a tonne. “You can procure this variety and mix it with traditional basmati and export at $800 a tonne. The Customs inspectors rarely check every container that goes as basmati,” they added.